Sinoearn International Ltd v. Hyundai Ccecc Joint Venture (A Firm)
Read the full judgment text of HCA 3987/2003 on BabelCite. This High Court CFI judgment was delivered on 18 April 2011.
1. The Defendant was the principal contractor for the construction works of the project for building container terminal 9 (“the CT9 project”) in Kwai Chung, Hong Kong.
Cited by 66 cases · Cites 2 cases
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HCA 3987/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 3987 OF 2003 ------------------------------
Before: Hon Au J. in Court Dates of Trial: 1-4, 8-10 & 15 November 2010 Date of Judgment: 18 April 2011 _______________ J U D G M E N T _______________ A. Introduction 1.The Defendant was the principal contractor for the construction works of the project for building container terminal 9 (“the CT9 project”) in Kwai Chung, Hong Kong. 2.This is the trial of the Plaintiff’s claim against the Defendant for breach of a contract entered into in July 2000. There is no dispute that the parties entered into a contract (“the dumping contract”) for the Defendant to engage the Plaintiff to act as its agent to obtain dumping permits from the relevant Mainland authority for dumping contaminated mud produced under the CT9 project in South Er Zhou in the Mainland waters. The centre dispute in the trial is as to whether the contract contained a particular term. 3.It is the Plaintiff’s pleaded case that under the dumping contract, the Defendant was committed to dump exactly 6,410,770 m3 of CT 9 contaminated mud at the unit price of HK$17.00 per m3 at South Er Zhou. In other words, it is the Plaintiff’s case that it should be entitled to be paid HK$108,983,090.00 under the dumping contract. In other words, the contract was a fixed sum contract. 4.It is common ground that (a) the agreed unit price under the dumping contract was HK$17 per m3, (b) the Defendant eventually had only dumped approximately 338,128 m3 of contaminated mud at South Er Zhou and (c) it had effectively paid the Plaintiff approximately HK$10,000,000.00 under the contract for various purposes[1]. The Defendant was therefore, says the Plaintiff, in breach of the dumping contract in failing to pay it the outstanding sum in the amount of HK$100,083,090.00. 5.The Plaintiff’s principal claim is thus for damages for breach of contract in the sum of $100,083,090.00. Alternatively, the Plaintiff seeks damages in (or in the form of indemnity from the Defendant for) the sums of HK$22,331,579.80 and RMB44,875,390.00 as various expenses or liabilities incurred by the Plaintiff under various back-to-back agreements and undertakings it had entered into in the Mainland for the purpose of its performance under the dumping contract. 6.The Defendant denies both liability and quantum. It further counterclaims for altogether some HK$5.2 million as money overpaid to the Plaintiff under the dumping contract. 7.Briefly, the Defendant’s pleaded case can be summarized as follows:
8.The Plaintiff in reply and in defence to the counterclaim effectively denies the Defendant’s case. 9.In the premises, the principal issues arising from the pleadings are thus:
10.There are subsidiary questions which arise from these principal issues, of which I would elaborate when I deal with them below. 11.But in order to understand the disputes in proper context, I need to first set out the relevant background. B. Background 12.Unless otherwise stated, the following are the relevant background facts arising from unchallenged or uncontroversial evidence, and common ground. 13.The Defendant was a joint venture between Hyundai Engineering and Construction Co Ltd (“Hyundai”) and China Civil Engineering Construction Corporation (“CCECC”) formed in around 1998 to tender for the construction works for the CT9 project. 14.In May 2000, the Defendant was awarded the contract for the construction works for CT9 and became the principal contractor. 15.The construction works of CT9 in part involved the deepening of a depth of some 50 feet of the Rambler Channel, dredging of the Kwai Chung Container Port to accommodate large container vessels and various substantial dredging and reclamation works. The said dredging works were amongst the first foundation works that the Defendant had to carry out to prepare the site for the construction of the container berths at CT9. 16.From the dredging works, massive amount of contaminated mud would be excavated and needed to be disposed of. The disposal of contaminated mud needed to satisfy environmental requirements imposed under the relevant governing authorities. It was therefore necessary for the Defendant to secure an approved dumping ground (for environmental protection reasons) for the said disposal of the contaminated mud. 17.At the same time, since a relatively tight work schedule provided in the contract, it was also imperative for the Defendant to so secure such a dumping ground as soon as possible after the award of the CT9 contract so as to enable it to commence full-scale work promptly. It was intended that the first berth of the CT 9 development to be commissioned in May 2002, with the last (sixth) berth be operational by November 2004. 18.The Defendant, as the main contractor, was to bear all the charges and levies imposed for the carriage and disposal of the contaminated mud. 19.The cost for disposing the contaminated mud at a site in Hong Kong waters as approved by the EPD would be significant. It was on the other hand generally cheaper to so dispose at an approved site in Mainland waters. 20.It is also common ground for the present purpose that there were two potential areas that might be considered for dumping the CT 9 contaminated mud:
21.In the beginning of May 2000, the Defendant applied for permits from EPD to enable it to dump the contaminated mud at ESC. The permit had to be renewed monthly. Although the application fee was HK$20,000.00 for each month, as mentioned above, the actual dumping fee would be charged at the rate of HK$55.40 per m3 measured by reference to the actual amount of mud dumped at the site. 22.The Defendant had in fact made use of the ESC in the beginning of the CT9 works and carried out some small-scale dumping operations there. 23.Then, sometime in June 2000, a Mr Lam Yiu Kong (“Mr Lam”) of Wing Yiu Co (“Wing Yiu”) called a Mr Shek Hung Yee (“Mr Shek”) of the Defendant, saying that he (Mr Lam) could procure dumping permits from SOA for dumping contaminated mud from the CT9 works at South Er Zhou in the Mainland waters. 24.Mr Shek was until April 2002 was the Defendant’s manager for land, electrical and mechanical works and coordination in relation to the CT9 contract. Mr Shek understood that Wing Yiu was a marine work contractor. 25.After consulting Mr Yong Bae Kwon (“Mr Kwon”) (the project director) and Mr Dunh Pil Choi (“Mr Choi”) (the project manager) of the Defendant, Mr Shek and Mr Choi met Mr Lam to hear from Mr Lam about engaging Wing Yiu to apply to SOA for dumping permits for dumping at South Er Zhou. Eventually, they decided to ask Mr Lam to arrange meetings with officials from the South China Sea Branch of SOA (“SCSB”) on behalf of the Defendant to explore the possibility of applying for such dumping permits. This was attractive to the Defendant as, if it could obtain the necessary dumping permits, it would be able to dispose the CT9 contaminated mud at a much lower cost. 26.Thereafter, Mr Choi, Mr Shek and Mr Lam went to Guangzhou to have meetings with the officials from SCSB to discuss the Defendant’s potential application for dumping permits. One of these officials was a Mr Chen Xin Xing (“Mr Chen”). 27.After a few rounds of meetings, SCSB was in principle agreeable to issue dumping permits to the Plaintiff but advised that the Defendant still had to locate and choose a suitable site for that purpose. Mr Chen then suggested to them three such potential sites:
28.Further, SCSB also suggested that, given that the Defendant had no previous experience in applying for such dumping permits and was not familiar with the procedures, it might better consider engaging an agent which had such previous experience to do so. For that purpose, Mr Chen provided to Mr Choi and Mr Shek the names of two such agents, being the Plaintiff and one Zhu Jiang Company. They were further informed that the Plaintiff had itself already established an approved temporary dumping site at South Er Zhou which had a dumping capacity in excess of 8 million m3. 29.Mr Choi and Mr Shek then discussed these options with Mr Kwon over the phone. Mr Kwon instructed that they should give priority to engage the assistance of whichever agent which could help the Defendant quickest to obtain such dumping permits. This would enable the Defendant to start dumping the contaminated mud at a site in the Mainland waters as soon as possible to save cost. 30.On 13 July 2000, Mr Choi, Mr Shek, Mr Lam and Mr Lam’s assistance (one Mr J Chan) gathered at the Guangdong Foreign Businessmen Club (“GFB Club”)[2]to discuss whether to engage Zhu Jiang or the Plaintiff as the Defendant’s agent to apply for the necessary dumping permits. After they had made a few enquiries, Mr Choi and Mr Shek decided that the Plaintiff was the preferred choice given:
31.Once so decided, through the contact of Mr Lam, the Plaintiff’s managing director, Mr Rudy Tsang (“Mr Tsang”), immediately came from Hong Kong on that day (i.e., 13 July 2000) to meet with Mr Choi and Mr Shek at the GFB Club to discuss and negotiate for the terms of the Defendant’s engagement of the Plaintiff as its agent. 32.The discussions at the GFB Club were conducted between Mr Choi (a Korean speaking in English) and Mr Tsang (speaking in Cantonese) through the interpretation of Mr Shek. The negotiations took many sessions and went well into that night. The negotiations focussed on the discussion of fees (based on a unit price) payable to the Plaintiff. 33.On 14 July 2000, the negotiations continued in the morning. Mr Choi and Mr Tsang eventually reached consensus on the unit price that the Plaintiff would charge the Defendant for acting as its application agent for dumping permits at the SEZ Site. During these negotiations, Mr Tsang had been occasionally on phone discussions with Mr Lam regarding the unit price payable. Apparently this is so as it was agreed amongst all of them (including Mr Choi) that, if the Plaintiff was so engaged by the Defendant, it (the Plaintiff) had to pay HK$1.2 per m3 as commission to Wing Yiu as the middleman. 34.Both Mr Choi and Mr Tsang then signed two Chinese documents (collectively “the 14/7 Documents”) prepared by Mr Shek to record what were agreed at the end of the discussions on that day. These documents were made on papers bearing the Defendant’s letterhead. 35.One of the 14/7 Documents provided as follows (in translation):
36.The other of the 14/7 Documents stated as follows (in translation):
37.After that, on 17 July 2000, Mr Tsang and Mr Shek met again, as Mr Tsang said the Plaintiff was going to put in an application for a dumping permit with SCSB. He handed to Mr Shek a letter dated 17 July 2000 prepared by the Plaintiff and addressed to the Defendant. The letter stated as follows:
38.Enclosed in this letter was a copy of a letter of authorization from the SCSB dated 20 October 1999, which stated that it had in principle agreed that the Plaintiff had until 31 December 2003 a right to dump dredged mud at the identified SEZ Site up to the volume of 8 million m3. 39.Subsequent to 14 July 2000, Mr Choi, in accordance with the work routine of Hyundai for drafting agreements, had asked one Mr Walsh (the manager of the Department of Quantity Surveying at Hyundai) to draw up the formal and detailed agreement. He had passed the details and information on what were discussed and concluded on 14 July 2000 to Mr Walsh for that purpose. 40.Mr Walsh then drafted a formal document which was dated 21 July 2000. The draft was passed amongst Mr Kwon, Mr Choi and Mr Shek for comments and approved by the senior management of Hyundai. This document (“the 21/7 Agreement”) forms one of the central documents debated at trial, and it is perhaps useful now to set it out in full:
41.Mr Choi signed the 21/7 Agreement for the Defendant and Mr Tsang for the Plaintiff in Hong Kong. When Mr Tsang signed it at the Defendant’s office, Mr Choi was not there and it was Mr Shek who explained its contents to Mr Tsang. 42.The 21/7 Agreement was subsequently amended by two addenda in relation to clauses 2.4 to 2.9. These amendments dealt with changes in some of the payments schedule. These amendments are not important for the present purposes. Unless stated otherwise, I would refer below to the 21/7 Agreement as the one as amended by the two addenda. 43.It is the Plaintiff’s pleaded case that:
44.It is however the Defendant’s case that:
45.It is also the Plaintiff’s case that, in order to carry out its obligations under the dumping contract, it had further entered into the following back-to-back agreements with other parties:
46.On 26 July 2000, Mr Tsang handed to Mr Shek a dumping permit No. NH/00/14 (“the 1st Dumping Permit”) issued by SCSB. The 1st Dumping Permit named Hyundai on behalf of the Plaintiff as the dumping unit. It permitted a dumping volume of 1 million m3 and had a validity period of 3 months lasting from 27 July to 26 October 2000. The 1st Dumping Permit also stated that it was for the exclusive use of Hyundai on behalf of the Plaintiff, and any assignment of it was prohibited. 47.By that time, as the Defendant had not paid the Plaintiff the sum for obtaining the 1st Dumping Permit as provided in the 21/7 Agreement, Mr Tsang told Mr Shek that in obtaining the 1st Dumping Permit, he had given the SCSB financial security (including a guarantee from a third party) for RMB7,000,000.00. He emphasized that he needed to make payment to the SCSB for the 1st Dumping Permit within a few days. 48.On 31 July 2000:
49.On 1 August 2000, Mr Tsang further gave Mr Shek a port clearance certificate issued by the Zhuhai port authority dated the same day. The certificate sanctioned the sailing of the Defendant’s named vessels or barges to the SEZ Site to carry out dumping of contaminated mud there. 50.The Defendant started carrying out dumping exercise at the SEZ Site on 2 August 2000. 51.On 21 August 2000, pursuant to the 21/7 Agreement, the Defendant remitted to the Plaintiff’s bank account HK$2,000,000.00 for the purpose of enabling the Plaintiff to secure a performance bond. 52.It further obtained a second similar loading permit from the EPD on 24 August 2000 for the month of September. 53.In about August 2000, Mr Choi’s secondment to the Hong Kong office of Hyundai ended and he returned to its head office in Seoul of South Korea. Mr Kwon became more involved in the CT9 works. 54.Then, in between late August and mid-September 2000:
55.On 19 September 2000, the Defendant submitted to EPD its application for a fresh loading permit for the month of October 2000. 56.In reply, by a letter dated 19 September 2000, the EPD stated that:
57.In light of EPD’s reply, Mr Shek then asked Mr Tsang to approach the SCSB on an urgent basis to try to obtain from them the environmental impact assessment reports which he had given to SCSB when the Defendant put in its application via the Plaintiff for the dumping permits. 58.On 21 September 2000, Mr Tsang handed to Mr Shek copies of the following:
59.The Defendant by its letter dated 21 September 2000 sent these documents to EPD in further support of its application for a loading permit. 60.At the same time, on 27 September 2000, the Defendant paid the Plaintiff a total sum of HK$900,000.00, out of which HK$500,000.00 was intended for payment for application for renewal of the port permits, and HK$400,000.00 was to be further paid over to Wing Yiu by the Plaintiff[4]. 61.However, on 4 October 2000, EPD formally replied to the Defendant rejecting its application for the October loading permit. It gave its reasons for the refusal as follows:
62.After obtaining legal advice, the Defendant lodged an appeal to the Dumping At Sea Appeal Board (“the Appeal Board”) against the EPD’s said decision. 63.The said appeal was eventually heard on 6 February 2001. It lasted for 5 days. 64.By a written decision dated 31 May 2001, the Appeal Board dismissed the Defendant’s appeal. 65.Subsequent to that, a meeting was held on 18 July 2001 between EPD and the Defendant with the presence of various other parties to further discuss what would be required to satisfy the EPD to consider issuing a loading permit to the Defendant. The EPD indicated that the Defendant would have to produce an environmental assessment report containing all the information required by the EPD, and if that report satisfied EPD’s requirements, it would issue a loading permit to the Defendant. 66.Soon after this meeting, the Defendant appointed Maunsell Environmental Management Consultants Ltd (“MEMCL”) to prepare an environmental impact assessment report as required by the EPD. For this purpose, MEMCL asked the Defendant to arrange facilities for it to conduct monitoring and testing works at the SEZ Site for both the wet season and dry season. 67.In light of MEMCL’s request, Mr Shek and a Dr Choy of MEMCL met with the chief engineer of the Monitoring Centre at its office in Guangzhou to discuss the possibility of engaging the Monitoring Centre to provide such facilities and assistance to MEMCL to carry out the said dry and wet seasons monitoring works. 68.Eventually on 29 August 2001, Hyundai[5] signed a contract (“the 2nd Monitoring Agreement”) with the Monitoring Centre, engaging its services to prepare a monitoring report of the waters at South Er Zhou during the wet season and the dry season. This report was intended to be included in the final environmental impact assessment report to be produced by MEMCL to be submitted to the EPD. 69.Before the 2nd Monitoring Agreement was made, the Plaintiff had given an undertaking (in Chinese) dated 22 August 2001 (“the Plaintiff’s Undertaking”) in favour of the Monitoring Centre relating to the intended 2nd Monitoring Agreement. It was stated in the Plaintiff’s Undertaking that it would first pay RMB700,000.00 to the Monitoring Centre as initial funding in relation to the total fees payable under the 2nd Monitoring Agreement to the extent of RMB1.9 million. The Plaintiff says it amounted to a undertaking to shoulder the payment of up to RMB1.9 million to the Monitoring Centre under the 2nd Monitoring Agreement 70.Within about a week after MEMCL and the Monitoring Centre had started work on the respective reports, in early September 2001, the Defendant suddenly:
71.On 30 October 2001, the Monitoring Centre sent a fax to the Defendant maintaining that there was a subsisting contract and complained about the Defendant’s failure to offer any explanation for instructing them to stop work after they had already completed the preliminary stages of the monitoring work. 72.The Defendant responded by a letter dated 2 November 2001. It was stated that the Defendant was encountering difficulties with dumping in the Mainland waters and offered to pay compensation to the Monitoring Centre for the work it had already undertaken under the 2nd Monitoring Agreement. 73.Apparently, the Monitoring Centre insisted being paid HK$1,267,760.00 and it had also asked the Plaintiff to pay it under the Plaintiff’s Undertaking. 74.The Defendant has not paid the Monitoring Centre any sums under the 2nd Monitoring Agreement. 75.Further, the Plaintiff sent a letter dated 13 March 2002 to the Defendant also demanding payment under the dumping contract. 76.By a letter dated 14 March 2002, the Defendant replied and denied any liability. 77.On 8 December 2008, the Plaintiff brought the present claim against the Defendant. C. The issues C1. Whether there was the Alleged Agree Quantity Term C1.1 The pleaded case 78.Specific to this issue, it is the Plaintiff’s pleaded case[6] that:
79.On the other hand, it is the Defendant’s case that:
80.There are therefore two questions arising from the contentions:
81.Under this issue, the Plaintiff has called the following witnesses to give evidence in support of its case:
82.The Defendant has two witnesses, namely Mr Choi and one Mr Ng, to give evidence on its behalf. Mr Ng was the General Manager of the Contracts Division of Hyundai at the material times. Mr Ng has filed two witness statements but the Plaintiff did not seek to cross-examine him, and thus he has not given live evidence at trial. C1.2 When was the agreement entered into 83.I agree with the Plaintiff that the parties entered into a binding agreement with the Defendant on 14 July 2000, which was evidenced by the 14/7 Documents. My reasons are as follows. 84.First, reading and construing these documents objectively and as a whole, they clearly show to me that the parties had the intention to enter into an agreement to engage the Plaintiff to act as its agent to apply for dumping permits with SCSB at a unit cost of HK$17.00. 85.In particular, the following translated words[7] used in the 14/7 Documents in my view objectively show that the parties intended to record an agreement reached on 14 July 2000 after engaging lengthy negotiations on 13 and 14 July 2000:
86.Secondly, I also agree with the submissions of Ms Cheng SC (for the Plaintiff) that, given the following background[8] leading to and at the time of the 14/7 Documents, it is objectively clear that the parties intended to enter into the agreement with binding effect:
87.Further, I also accept that the 14/7 Documents contained all the necessary essential terms to form a binding agreement on the Defendant engaging the Plaintiff to apply for dumping permits with SCSB for the contaminated mud coming from CT9 at an unit price of HK$17.00, leaving the parties to agree further on the other terms required to carry out and implement this principal agreement. See: Chitty on Contracts (30th ed), paras 2-113 to 114; Hillas & Co Ltd v Arcos Ltd [1932] 147 LT 503 at 514 per Lord Wright; RTS Flexible Systems Ltd v Molkerei Alois Mller Gmbh & Co KG (UK Production) [2010] UKSC 14 at paras 45-50. 88.In the premises, I hold that the parties entered into a binding agreement (“the 14/7 Agreement”) on 14 July 2000 whereby the Defendant agreed to engage the Plaintiff to act as its agent at a service fee of HK$17.00 per m3 to apply for dumping permits with SCSB for the purpose of dumping contaminated mud from CT9 development at the SEZ Site. This agreement was evidenced by and contained in the 14/7 Documents. C1.3 Was there the Alleged Agreed Quantity Term, whether express or implied 89.On construing the terms of a contract, the following uncontroversial legal principles apply:
90.Bearing these principles in mind, I now turn to the present case. 91.It is important to note that it is not part of the Plaintiff’s case that there was an oral agreement or term that the Defendant agreed to commit itself to the Plaintiff that it would dump the Alleged Agreed Quantity under the 14/7 Agreement. The Plaintiff’s case is restricted to there being either an express term or implied term of the agreement. 92.Insofar as the case on express term is concerned, I can quickly deal with it as follows. 93.It is not entirely clear as to what the Plaintiff’s case on express term is. However, it is clear and undisputed that no such term was written in the 14/7 Documents and the 21/7 Agreement. In light of this, and given that this is not a case on an oral collateral agreement or oral term[16], nor is it the Plaintiff’s case that such a term arises from a proper construction of any of the written clauses of these documents, I cannot see how it can be seriously contended that there was an express term of the 14/7 Agreement of such an effect. 94.Further, and insofar as necessary, I also find that the Plaintiff’s case on an express term is untenable objectively in light of the following:
95.I therefore conclude that there was no such express term of the Alleged Agreed Quantity Term in the 14/7 Agreement (or the entire dumping contract). 96.I now turn to the Plaintiff’s case on implied term. 97.Again, it is not entirely clear from the pleadings as to what the Plaintiff’s case on an implied term is. No specific grounds in support of such an implied term are pleaded. It is also not pleaded as to whether such an implied term arose by reason of obvious implication, business efficacy and/or as a matter of law. However, at the same time, the Defendant has not sought further and better particulars on the Plaintiff’s pleadings relating to the claim of implied term. I would therefore have to consider the Plaintiff’s case on these various trite grounds. 98.Ms Cheng runs the case on there being such a term of the contract[19] in her Opening Submissions at paragraph 9 as follows:
99.In support of her case on finding such a term, Ms Cheng also relies on the undisputed fact that the Alleged Agreed Quantity was expressly stated in a quotation requisition sheet as the quantity of contaminated mud to be dredged from the CT9 development. The Defendant sent the quotation requisition sheet to various subcontractors (including the Plaintiff) back in January 2000[20] to invite them to give a quotation for the provision of dumping ground for contaminated mud from CT9 development. It was further provided in the quotation requisition sheet that the subcontractor were “now informed of the total volume of contaminated mud to be dumped. Will [it] be able to quot [sic] for the price per unit volume now”. 100.Insofar as Ms Cheng is inviting me to look at the background facts to consider the implication into the agreement the Alleged Agreed Quantity Term, applying the principles I have set out above, I am prepared to consider the various witnesses’ evidence adduced by the parties but only to the extent to enable me to find the relevant background matrix relating to the entering into the 14/7 Agreement. 101.After considering the evidence, in addition to the uncontroversial background I have set out in Section B and paragraph 86 above, I am prepared to further accept that the evidence[21] establishes the following background factual matrix relevant to the 14/7 Agreement:
102.However, even after taking into account of all these background matrix and facts, including the quotation requisition sheet, I do not see how these would support the fining of an implied term that the Defendant had agreed and committed to dump the Alleged Agreed Quantity of contaminated mud. 103.The clear and unchallenged evidence shows that at the time of the agreement, the parties only had a rough estimation of what the amount of the contaminated mud that mightcome out from the CT9 development would be. 104.In light of this, there is simply no room to imply a term to the agreement for the Alleged Agreed Quantity, which represented an exact amount of 6,410,770 m3 of contaminated mud because:
105.Much evidence has been given by Mr Shek and Mr Tsang for the Plaintiff at trial to explain why, if there was already the Alleged Agreed Quantity Term under the 14/7 Agreement, Mr Tsang still agreed to sign the 21/7 Agreement, which contained express clauses (as mentioned above) contradicting the said alleged term. They have been subject to extensive cross-examinations by Mr Scott SC for the Defendant. Effectively:
106.I have no hesitation in rejecting both of their evidence as unreliable:
107.In the circumstances, I see no reason to explain away the contradiction between the existence of the Alleged Agreed Quantity Term and these clauses in the 21/7 Agreement for the implementation of the 14/7 Agreement. 108.For the above reasons, I also reject the Plaintiff’s case on implied term. C1.4 Conclusion under the 1st issue 109.I therefore hold that:
C1.5 The Plaintiff’s alternative cases 110.Although not pleaded, in its Closing Submissions, the Plaintiff seeks to run two further alternative cases on the term of the dumping contract (i.e., the 14/7 Agreement read together with the 21/7 Agreement). They are in summary as follows. 111.As the first alternative, it is contended that by concluding the 14/7 Agreement and/or the 21/7 Agreement, the Defendant agreed to engage the Plaintiff to secure the right to dump the entire quantity of mud dredged from CT9 project at the SEZ Site. Although no quantity of contaminated mud had been fixed, the quantity relating to the right to dump was ascertainable and referable to the entire amount of contaminated mud that was dredged from the CT9 project (subject to the “bad weather” exception as explained below). 112.However, as there is no evidence at trial as to what was the entire quantity of mud dredged from the CT9 project (understandably so, since this issue does not arise from the pleadings and at trial), Ms Cheng says if the Plaintiff could succeed on this, there should be a further direction for assessment of damages. 113.As the second alternative, it is submitted that the Plaintiff’s contractual duty under the dumping contract was to secure the right to dump (i.e., the dumping permits) for the Defendant, and it was entitled to receive HK$17.00 per m3 on the volume of the right to dump that it had secured for the Defendant (as opposed to the actual dumped volume) under the said permits. Given that the Plaintiff had successfully obtained the 1st Dumping Permit for the right to dump 1 million m3 contaminated mud, the Plaintiff was thus entitled to receive HK$17 million of which the Defendant had only paid HK$8.9 million. The Plaintiff should therefore be entitled to claim for the difference of HK$8.1 million. 114.Ms Cheng cited the CFA’s decision in Mak Kang Hoi v Ho Yuk Wah[24] to say that, although these alternative cases are not specifically pleaded, the Plaintiff should still be permitted to run them as it is only seeking the Court to determine the terms of an agreement with the same set of evidence adduced at trial. These alternative cases are also not radical departure from the primary pleaded case. No prejudice could be thus said to be caused to the Defendant. 115.Although objecting these alternative cases to be advanced, Mr Scott SC for the Defendant has not clearly identified any specific prejudice that would have caused to the Defendant if they are so allowed to be run. In particular, counsel has not specifically shown what evidence the Defendant would have adduced had these alternative cases had been specifically pleaded and is thus prejudiced by having been deprived of the chance to do so. 116.I am therefore prepared do allow these alternative cases of the Plaintiff to be run by way of submissions. 117.After consideration, I would however also reject these two alternative cases for the following reasons. 118.Insofar as to the first alternative case is concerned, the contended term that the Defendant had agreed to dump the entire contaminated mud dredged from the CT9 project under the dumping contract is simply and clearly inconsistent with clause 2.8 of the 21/7 Agreement. Clause 2.8 provided as follows:
119.Clause 2.8 thus set out objectively clear that for the purpose of calculating the final quantity of the contaminated mud dumped at the SEZ Site (for the purpose of calculating the sums payable by the Defendant to the Plaintiff under the dumping contract), the measurement should take into account of mud dumped in other disposal sites. 120.This therefore does not permit a construction of the dumping contract for a term that the Defendant must dump all the contaminated mud dredged from the CT9 project at the SEZ Site. 121.Ms Cheng tries to argue[25] that the dumping at other disposal areas provided in clause 2.8 is, by proper construction with reference to the background matrix, only a reference to the situation of bad weather. 122.With respect, I disagree. I can see nothing from the factual matrix or in the 14/7 Agreement and the 21/7 Agreement that would objectively limit or confine the reference to “any other Survey quantities of contaminated mud dumped in other disposal areas” in clause 2.8 to only “bad weather” exception. It is pertinent to note that nowhere in all 14/7 Agreement and the 21/7 Agreement had an express reference to a “bad weather” exception. 123.I may also add that the provision in one of the 14/7 Documents that “the total quantity is subject to the final quantity confirmed by the Owner of [the CT9 Development] to [the Defendant]” is equally consistent with an objective meaning that the total quantity to be measured under the agreement was those confirmed quantity dredged from the CT9 project and actually dumped at SEZ Site. This therefore does not point objectively to a construction (as also contended by Ms Cheng) that the Defendant must have to dump all the mud dredged out from the CT9 project at that site. 124.I therefore reject the Plaintiff’s first alternative case whether on a case of express or implied term. 125.In relation to the second alternative case, similarly, in light of clauses 2.7 and 2.8 of the 21/7 Agreement, which dealt with the final measurements of the contaminated dumped at the SEZ Site, it is also inconsistent with there being a term of the dumping contract that the Plaintiff was entitled to the payment of the full amount (i.e, HK$17,000,000.00) of the 1st Dumping Permit (permitting the dumping of 1,000,000 m3 of contaminated mud) as obtained irrespective of whether or not the Defendant in fact dumped the full 1,000,000 m3 of mud. It is important note that:
126.I therefore further reject the Plaintiff’s 2nd alternative case. C2. Was the dumping contract frustrated 127.Given my conclusion above, the issue of whether the dumping contract was frustrated does not arise. 128.However, as this has been argued fully before me, I would deal with the question of frustration briefly as follows. C2.1 The law 129.Frustration is a common law doctrine which discharges the parties from performing their obligations under a contract. It occurs whenever the law recognises that without default of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. However, there is generally no frustration if it has only become more onerous or expensive for the party to perform its outstanding obligations under the contract. See: Davis Contractor v Fareham[26]and National Carriers Ltd v Panalpina (Northern) Ltd[27]. 130.In J Lauritzen AS v Wijsmuller BV (the Super Servant Two)[28], Bingham LJ set out the following five propositions which form the essence of the doctrine. These have been summarized in Chitty on Contracts[29] as follows:
131.Further, the mere fact that it has become no longer commercially viable to perform the contract is not sufficient to invoke the doctrine of frustration: Tenants (Lancashire) Ltd v CS Wilson & Co Ltd[30] and Thames Valley Power Ltd v Total Gas & Power Ltd[31]. C2.2 The present case 132.As an alternative defence, the Defendant pleaded that the dumping contract was frustrated by the dismissal of its appeal against the EPD’s refusal to grant the loading permits. 133.I do not think the evidence establishes that this amounted to a frustration event:
134.For these reasons, I would have dismissed the Defendant’s defence of frustration if this had become a relevant issue. C3. The Plaintiff’s liability under the Mainland back-to-back agreements and undertakings 135.Whether the Plaintiff is liable under PRC law under the Mainland back-to-back agreements and undertakings it had given relating to the dumping contract is relevant to the question on whether the Plaintiff is entitled to be indemnified by the Defendant for these liabilities. This question however would only need to be determined if the Defendant was in breach of the dumping contract and that there was a frustration of the dumping contract. 136.Again, in light of my conclusion above that (a) the Defendant was not in breach of the dumping contract, and (b) even if the Defendant were in breach of it, there was no frustration thereof, this issue simply does not arise. 137.But for completeness, I would also deal with this issue quickly as follows. C3.1 The contentions 138.Under clauses 2.3 and 2.9 of the 21/7 Agreement, the Plaintiff was responsible for paying all fees and expenses incurred in respect of obtaining the dumping permits and for liasing with all concerned parties for the smooth progress of the Defendant’s operations to dump contaminated mud at the SEZ Site. The agreed fees to be paid by the Defendant to the Plaintiff under the contract (i.e., at the rate of HK$17.00/ m3 of contaminated mud) was inclusive of all such costs and expenses whatsoever incurred. 139.I accept that for the purpose of the dumping contract:
140.On the other hand, for the same reasons I set out above in rejecting the Plaintiff’s case on the Alleged Agreed Quantity Term, I would have also rejected Mr Tsang’s evidence that (a) the Plaintiff had given an undertaking on 15 July 2000 to SCSB to the effect that the Defendant would dump the Alleged Agreed Quantity of contaminated mud, and (b) based on that undertaking, SCSB agreed to set the dumping levy at the rate of RMB7.00 per m3 based on this amount. However, if I am wrong in rejecting the Plaintiff’s case on the Alleged Agreed Quantity Term on those bases, then I would have inclined to accept Mr Tsang’s evidence that he had given this undertaking (“the Alleged Agreed Quantity Undertaking”). 141.It is the Plaintiff’s case that even if the dumping contract was frustrated[34], it is entitled to be reimbursed for its liability under the Back-to-Back Agreements, the Plaintiff’s Undertaking and the Alleged Agreed Quantity Undertaking under section 16 of LARCO. Such reimbursement may be made in the form of an order for indemnity. 142.The Defendant’s defence is essentially that under the relevant PRC law (which governs these Back-to-Back Agreements and undertakings), the Plaintiff was not liable by way of time limitation or various other defences, including the defence of change of circumstances, once the head contract (i.e., the dumping contract, governed by Hong Kong law) was frustrated. In this respect, the Defendant relies on the expert evidence of Prof Zhang on PRC law to support its case. 143.On the other hand, the Plaintiff relies on Prof Ge’s expert opinion to effectively say that, under PRC law, there were no valid defences available to the Plaintiff to deny liabilities under these agreements and undertakings. 144.Prof Ge is a professor of law at the Peking University and had been a practising PRC lawyer. The Defendant has not challenged his expertise. 145.Prof Zhang is professor on PRC law at the Hong Kong University. Ms Cheng for the Plaintiff challenges Prof Zhang’s expertise on PRC contract law (which is the relevant discipline of PRC law for the present purpose) mainly on the following two grounds:
146.Although Ms Cheng’s submissions have some force, I am not prepared to reject Prof Zhang’s opinion for lack of expertise as contended. In particular, Prof Zhang’s experience as out in his expert report[35] that (a) he is an arbitrator of CIETAC, and (b) he has done extensive research also in PRC contract law, foreign investment law and cross-border legal relationship has not been subject to any real challenge. In my view, unless the contrary has been shown (which has not), these experiences should provide to support Prof Zhang’s expertise in giving opinion on PRC contract law for the present purpose. 147.Notwithstanding this, I would however in general prefer Prof Ge’s opinion to that of Prof Zhang’s in case of any conflicts as to whether the Plaintiff is in a position under the relevant PRC law to deny liability under the respective Back-to-Back Agreements and undertakings. My reasons can be summarised as follows. 148.First, Prof Ge as an expert witness is generally consistent and unshaken under cross-examination in relation to the opinions he has expressed, and it has not been demonstrated that the opinions so expressed are flawed in any material aspects. He has expressed his views in a clear, logical and cogent manner. Moreover, Prof Ge has been fair and honest in giving evidence in Court. He demonstrates independence in readily admitting matters that he may not have sufficient knowledge or in a position to give, when asked, a view on. 149.In contrast, Prof Zhang appears from time to time to be evasive in his answers to questions under cross-examination. I also agree and accept Ms Cheng’s submissions that some parts of Prof Zhang’s opinions appear to be inconsistent and not supported by analysis:
150.Secondly, I also agree with Ms Cheng that Prof Zhang appears to have crossed the line of an independent expert to act as an advocate for the Defendant. Below are two of the most notable examples:
151.For these reasons, I would reject Prof Zhang’s opinions insofar as they conflict with Prof Ge’s opinions. 152.Therefore, had the issue become relevant:
C4. The Counterclaim 153.As I have rejected the Plaintiff’s primary claim and come to the conclusion that the dumping contract was a measurement contract, I would allow the Defendant’s Counterclaim. However, I am not satisfied that the Defendant is entitled to be repaid the HK$900,000.00 it had paid to the Plaintiff for the extension of the validity of the relevant permits, since it was the Defendant’s own request for making the application for extension. I am also not satisfied that there is evidence to show that the extension application was unsuccessful as alleged by the Defendant. 154.In the premises, the Plaintiff should pay the Defendant the sum of HK$3,151,824.00 (HK$8,900,000.00 – HK$5,748,176.00[41]). D. Conclusion 155.I would dismiss the Plaintiff’s claim and allow the Defendant’s counterclaim for the sum of HK$3,151.824.00. The Defendant is further entitled to interest on this sum at the rate of 1% above the prime rate as from time to time quoted by HSBC, from the date of writ until today, and thereafter at judgment rate until full payment. 156.Insofar as costs is concerned, there appears to be no reason why it should not follow the event. I further make an order nisi that costs of the action (including the counterclaim) be to the Defendant to be taxed if not agreed. The order nisi shall be made absolute 14 days from today unless any of the parties applies to vary it by Summons. 157.Lastly, I thank counsel for their helpful assistance in this matter.
Ms. Teresa Y.W. CHENG, S.C. leading Mr. Adrian Y.H. LAI, instructed by Messrs C.Y. Tsang & Co., for Plaintiff Mr. John A. SCOTT, S.C. leading Mr. Martin W.H. WONG, instructed by Messrs Chong & Partners, for Defendant [1] Out which, HK$8,900,000.00 was paid to the Defendant for obtaining the permits as its entitlement under the contract. [2] Mr Choi and Mr Shek were then staying at the GFB Club. [3] The original Chinese words of “Relevant details of construction” are “有關施工細節…”, which mean the details of the implementation or carrying of the works. [4] This is set out in Mr Shek’s Amended Witness Statement and is not countered by any evidence from Mr Choi. [5] This agreement was signed by Hyundai as a party to it. However, apparently for the present purpose, no one is taking issue that the agreement was in effect entered into by Hyundai acting on behalf of the Defendant. [6] As pleaded at paragraphs 3 to 13 of the Re-Amended Statement of Claim, and as run and set out in the Plaintiff’s Opening Submissions. [7] Which translations are certified by the court translator, and not disputed by the Defendant. [8] These background facts are supported from the unchallenged parts of the evidence of Mr Shek and Mr Tsang (which I accept) and Mr Choi’s own evidence. Insofar as there is evidence in Mr Ng’s witness statement dealing with the 14/7 Documents, I would reject it as (a) he was not involved at all in that process, and (b) his evidence is in effect a purported construction of the documents, which is simply not a matter for a factual witness. [9] Although generally subsequent acts are inadmissible to interpret a written agreement, they may be relied upon to show whether there was a contract: Chitty on Contracts (30th ed), para 12-126. [10] [2004] 1 AC 919. [11] (1999) 2 HKCFAR 279, 29 per Lord Hoffmann. [12] [2007] 1 HKLRD 55 (CA) at 67 per Cheung JA. [13] (1977) 16 ALR 363 at 376. [14] Ashmore v Corporation of Lloyd’s (No. 2) [1992] 2 Lloyd’s Rep. 620 at 627 col 1. [15] Tai Hing Cotton Mill v Liu Chong Hing (No. 1) [1986] 1 AC 80 (PC); Liverpool CC v Irwin [1977] AC 239 at 266 per Lord Edmund-Davis, at 262 per Lord Salmon. [16] Which in any event is not supported by any of the evidence called. [17] Clause 2.5. [18] Clauses 2.7 and 2.8. [19] It is not clear whether Ms Cheng is also relying on these to support a case on express term. If so, I have no hesitation in saying that, for the reasons given above, these could not lead me to finding such an express term as contended. [20] That is, more than 6 months before the parties engaged in the negotiations on 13 July 2000 which led to the 14/7 Agreement, and thus was sent out not for the purpose of that negotiations. [21] Insofar as there are any conflicts between the evidence of Mr Choi on the one hand, and Mr Shek and Mr Tsang on the other hand relating to what happened by way of background leading to the 14/7 Agreement, I would prefer the evidence of Mr Choi. This is so because (a) Mr Choi’s evidence is inherently more reliable given that it is premised and refreshed upon the contemporary diary notes he had made at the material time, and (b) Mr Choi’s evidence is given at trial in a consistent and unshaken manner. His evidence is not materially challenged. On the other hand, I note that the evidence of Mr Shek and Mr Tsang is from time to time inconsistent and contradictory, as summarized and submitted by Mr Scott for the Defendant in his closing submissions, which I accept. Further, in regard to the evidence of Mr Chen, Mr Chen Xin and Mr Lam, I have taken the uncontroversial parts of their evidence into account in finding the relevant background. If their evidence is inconsistent with that of Mr Choi, I have rejected it as, for the reasons given above, I prefer Mr Choi’s evidence as being more reliable. It is also pertinent to note that they were not directly involved in formation of the 14/7 Agreement. [22] The Plaintiff in his own Closing Submissions at paragraph 82 accepts this. [23] At paragraphs 85 and 88 of Mr Shek’s Amended Witness Statement. [24] (2007) 10 HKCFAR 535 at paras 101-107 per Mortimer NPJ. [25] See paras 95-99 of the Plaintiff’s Closing Submissions. [26] [1956] AC 696 at 729 per Lord Radcliffe. [27] [1981] AC 675 at 700F per Lord Simon. [28] [1990] 1 Lloyd’s Rep 1 at 8. [29] Supra, at para 23-007. [30] [1917] AC 495 at 510 per Earl Loreburn. [31] [2006] 1 Lloyd’s Rep 441 at 451. [32] See paras 15 and 16 of Mr Ng’s Supplemental Witness Statement. [33] The Defendant has not relied on the said potential breach of the special condition of the land grant as a frustrating event. [34] The Plaintiff has made extensive submissions that these liabilities should fall within the 2nd limb of the well known Hadley v Baxendale test, and thus are damages recoverable from the Defendant if there was a breach of the contract. I however do not find this necessary to be dealt with, since if the Defendant were in breach of the contract, the primary damages for HK$17.00/m3 over the quantity of contaminated mud as agreed (as contended by the Plaintiff) would have covered the same by reason of clauses 2.3 and 2.9 of the 21/7 Agreement as mentioned above. There should not be any double counting for the damages. However, if it were necessary for me to form a view, I would have accepted that the liabilities (if any) of these back-to-back contracts would have fallen within the 2nd limb of Hadley v Baxendale test and thus are prima facie recoverable. [35] At paras 2.2 and 2.3. [36] At para 5.6. [37] See para 4.8 of Prof Zhang’s report. [38] At paragraphs 131 to 135 of his Closing Submissions. [39] If the Plaintiff succeeded on the case of the Alleged Agreed Quantity Term, but the contract was frustrated. [40] Say, if the Plaintiff had failed on the Alleged Agreed Quantity Term but succeeded on its alternative cases but the contract was held to be frustrated. [41] Being 338,128m3 of contaminated mud actually dumped at the SEZ Site x HK$17.00 per m3 that the Plaintiff was entitled to be paid under the dumping contract. Plaintiff's appeal to Court of Appeal allowed. Please refer to CACV83/2011 dated 23 December 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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